To The Moon

Microsoft and Activision Blizzard Conference Call

SATYA NADELLA:Thank you, Brett, and thank you, everyone, for joining us to talk about this exciting milestone for Microsoft, Activision Blizzard and the entire gaming industry.

This morning, we announced that we will acquire Activision Blizzard in an all-cash transaction valued at $68.7 billion. This will be the largest acquisition in our history, and we’re investing to create a thriving gaming ecosystem, one where world-class content can more easily reach every gamer across every platform.

For us, when we think about acquisitions, we always start with our mission, to empower every person and every organization on the planet to achieve more. Activision Blizzard is one of the premier game publishers worldwide, and their mission to connect and engage the world through epic entertainment is deeply aligned with our own. Together, our ambition is to bring the joy and community of gaming to everyone on the planet.

When I step back, it’s hard to overstate how competitive, dynamic and exciting the gaming industry is today. Gaming is the largest and fastest-growing category in entertainment. The last two years in particular have shown how critical games are to helping people maintain a sense of community and belonging, even when they’re apart.

Today, three billion consumers around the world play games, and we expect this number will reach 4.5 billion by 2030 as new generations turn to gaming for entertainment, community and a sense of achievement. We are seeing more players, more streamers, more titles and more new game publishers than ever before.

But too much friction still exists today between content, consumption and commerce. We need to make it easier for people to connect and play great games, wherever, whenever and however they want. Today, we face strong global competition from companies that generate more revenue from game distribution than we do from our share of game sales and subscriptions. We need more innovation and investment in content creation and fewer constraints on distribution.

Our vision is for a river of entertainment where the content and commerce flow freely, driving a renaissance across the entire industry to make games more inclusive and accessible to all. And together with Activision Blizzard, that’s what we will be able to deliver. Removing these barriers will only become more important as the digital and physical worlds come together and the metaverse platforms develops.

When we think about our vision for what a metaverse can be, we believe there won’t be a single, centralized metaverse and there shouldn’t be. We need to support many metaverse platforms, as well as a robust ecosystem of content, commerce and applications. In gaming, we see the metaverse as a collection of communities and individual identities anchored in strong content franchises, accessible on every device. And bringing fantastic entertainment together with new technologies, communities and business models is exactly what this transaction is about.

Together with Activision Blizzard, we have an incredible opportunity to invest and innovate to create the best content, community and cloud for gamers to build substantial new value for our shareholders. It starts with content across the console, PC and mobile. Activision Blizzard is home to some of the world’s most legendary games, including billion dollar franchises likeCall of Duty,Candy Crush,World of Warcraft. Activision Blizzard’s portfolio adds to our own first-party lineup, fromMinecrafttoForzatoHaloand the iconic franchises we acquired as part of the acquisition of ZeniMax Media just last year, includingFallout,DoomandElder Scrolls.

Critically, this transaction significantly expands our presence in mobile, the largest segment in gaming business. Activision Blizzard’s King division is one of the global leaders in mobile gaming. And we will bring as many Activision Blizzard games as we can to our Game Pass subscription service across the PC, console and mobile, including both new games, as well as games from Activision Blizzard’s incredible catalogue, offering even better value and more choice for our gamers.

Together, we have one of the most diverse and robust content pipelines in the industry across every endpoint.

The second key area is community. Activision Blizzard has nearly 400 million monthly active players across 190 countries today. That reach builds on the strength of our own gaming community, fromMinecraftand Xbox network to Game Pass. Game Pass now have more than 25 million subscribers, and we’re creating new opportunities for creators across our ecosystem with programs like ID at Xbox, which helped independent developers publish their creations across our platforms.

Together with Activision Blizzard, we will have one of the largest and most engaged communities in all of entertainment, and we’re excited to create new opportunities for both leading publishers, as well as for individuals and small teams to build and monetize their creations across this community.

And finally, and not least, cloud gaming. As we’ve talked about, we deliver the joy and community of gaming by putting players at the center of their entertainment, enabling people everywhere to stream games in high fidelity. That’s why we’ve invested over the past few years in Xbox cloud gaming, deploying specialized Xbox hardware in our datacenters around the world.

Through the cloud, we’re extending the Xbox ecosystem and community to millions of new people, including in global markets where traditional PC and console gaming has long been a challenge. And when we look ahead and consider new possibilities, like offeringOverwatchorDiablo, via streaming to anyone with a phone as part of Game Pass, you start to understand how exciting this acquisition will be.

I want to wrap by talking briefly about a vital factor that underlies all of the opportunities I’ve talked about, culture. As CEO of Microsoft, the culture of our organization is my number one priority. This means we must continuously improve the lived experience of our employees and create an environment that allows us to constantly drive every day improvement in our culture.

This is hard work. It requires consistency, commitment and leadership that not only talks the talk, but walks the walk. That’s why we believe it’s critical for the Activision Blizzard to drive forward on its renewed cultural commitments. We are supportive of the goal and the work Activision Blizzard is doing, and we also recognize that after close, we will have significant work to do in order to continue to build a culture where everyone can do their best work.

And this isn’t just for about employees. Our journey of inclusion extends to creating a welcoming and safe community for all our customers, including the hundreds of millions of players who enjoy our games and interactive services. We are committed to protecting players and empowering our employees to do what they love while thriving in a safe and inclusive culture, one where everyone is invited to play. The success of this acquisition will depend on it.

To close, I’ll share some additional details on the transaction. We expect the acquisition to close in fiscal year 2023. When it does, the Activision Blizzard business will report to Phil Spencer, CEO of Microsoft Gaming, who has demonstrated leadership, driving both gaming business success, as well as culture change.

Over more than 30 years as CEO of Activision Blizzard, Bobby Kotick has built the company into one of the world’s most successful and influential entertainment companies, and I’m grateful for his leadership and commitment to real culture change.With that, let me hand it over to Bobby to share more about the opportunity ahead.

BOBBY KOTICK:Thank you, Satya, and thank you for welcoming us as a part of one of the world’s most admired companies.

I remember our conversation on your first day as CEO. You shared your bold vision to lead Microsoft to help empower people everywhere in the world, and I left inspired.

Our mission, connecting and engaging the world through joy and fun, is also incredibly empowering for our players. Thirty-one years ago, Brian and I began a journey to build one of the world’s great entertainment companies. Our 10,000 exceptionally talented employees in every creative, technical and commercial discipline have passionately built and nurtured some of the world’s most loved and played games.

When we first discussed the chance to merge our incredible talent, extraordinary franchises, our shared commitment to the very best workplaces, and access to Microsoft’s vast resources, it gave Brian, our board of directors and me confidence that we would have a far better chance to succeed in the increasingly competitive race for leadership as gaming through the metaverse evolves.

Our Activision Blizzard and King teams have transformed games into social experiences, enabled players to find purpose and meaning through games. And every day, we entertain communities of hundreds of millions of players connected through our franchises.

Connecting these communities together is the next step in the creation of the metaverse. The race to do this is accelerating, and the resources required for success are enormous. So many of the world’s biggest companies have ambitions with their own gaming and metaverse initiatives. Established and emerging competitors see opportunity for virtual worlds filled with professionally produce content, user-generated content, and rich social connections.

Our talent and our franchises are critical components of the construction of a rich metaverse. We’ve always attracted the very best game makers and built the very best game franchises, seizing opportunity with passion, inspiration, focus and determination.

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